Nordic Credit Rating (NCR) said today that it had revised its outlook on Sweden-based logistics property manager Catena AB (publ) to positive from stable. At the same time, the 'BBB-' long-term and 'N4' short-term issuer ratings were affirmed.
Rating rationale
The outlook revision reflects an improved financial risk profile, following two equity injections in 2022, and a new debt/EBITDA target of below 9x, effectively setting a limit on future leverage. We do, however, remain cautious, given the uncertain market environment and Catena's history of extensive growth through projects and acquisitions. If the company demonstrates its commitment to lower leverage and maintains strong cash flows in a weaker economy, we would likely raise the rating.
We have revised our assessment of Catena's operating environment to reflect our view that Catena's property portfolio, with a large share of modern logistics properties in prime locations, is likely to be less volatile than the logistics segment as a whole. It also takes account of the increasing importance of logistics properties to the economy as e-commerce grows in importance to overall consumption. We have also raised our assessment of Catena's financial risk appetite to reflect the company's new leverage target and its owner support through equity injections.
Positive outlook
The positive outlook reflects our view that if Catena performs in line with our expectations, despite the uncertain market environment and the company's investment ambitions, we could lift our assessment of the financial risk and raise the rating. The outlook also reflects our belief that Catena will continue its focus on attractive logistics properties in prime locations in Sweden and Denmark. Furthermore, we expect the positive long-term trend in e-commerce to continue to benefit the logistics subsector, and that Catena will proactively refinance upcoming debt maturities.
We could raise the rating to reflect a proven commitment to a more moderate financial risk profile, keeping net debt/EBITDA close to 8x, net loan to value (LTV) below 45%, and interest coverage above 3.5x. We could also raise the rating to reflect an increased portfolio size combined with reduced portfolio concentrations, or a less concentrated debt maturity profile and improved liquidity.
We could revise the outlook to stable to reflect net LTV above 45% and net debt/EBITDA close to 9x for a protracted period, or to reflect interest coverage below 3.5x over a protracted period. We could also revise the outlook to stable to reflect deteriorating market fundamentals adversely affecting occupancy and/or profitability.
Rating list | To | From |
---|---|---|
Long-term issuer credit rating: | BBB- | BBB- |
Outlook: | Positive | Stable |
Short-term issuer credit rating: | N4 | N4 |
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Yun Zhou, analyst, +46732324378, yun.zhou@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022, NCR's Corporate Rating Methodology published on 8 May 2023 and NCR's Rating Principles published on 24 May 2022. For the full regulatory disclaimer please see the rating report.